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section 871(a); (2) if the income is effectively connected with a
trade or business within the United States, or if an election is
made to treat the income as effectively connected, the tax is
computed pursuant to section 871(b), on net rental income at the
graduated rates prescribed by section 1, provided that the
taxpayer has filed a return as required by section 874(a); and
(3) where the income is effectively connected and the taxpayer
fails to file a tax return as required by section 874(a), the tax
is computed on gross rental income at the graduated rates
prescribed in section 1.
Petitioner, while recognizing that section 874(a) disallows
deductions if no return is filed, asserts that he did file
returns for the years in question. The issue, therefore, is
whether the returns submitted on October 7, 1993, after
respondent notified petitioner that he had not filed returns and
after respondent prepared returns for petitioner but before the
notice of deficiency was issued, satisfy the requirements of
section 874(a).
On its face, section 874 contains no time limit within which
a nonresident alien must file an income tax return. For taxable
years ending after July 31, 1990, the regulations explicitly
create a timely filing requirement. Section 1.874-1(b)(1),
Income Tax Regs., as amended by T.D. 8322, 1990-2 C.B. 172, 173,
provides, inter alia, that
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